Demand ratchet is a means of applying a minimum billing to a customer who may have inconsistent or seasonal energy requirements. For example, a ski resort may have significant energy requirements for only six months of the year, but the utility may have to maintain extra staff or equipment to make that energy available when the resort needs it. In order to bill this customer fairly, a demand ratchet must be applied. A minimum monthly billing will be calculated based on a given percentage of their peak use, for example 60% of their January billing, and the resort will be billed at least this much for every month of the year, even if they use little or no energy during that month. This insures that the utility is properly compensated for the year-round expenses it incurs to serve this customer.

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